"Given the fragile state of the console game market, we expect the E3 trade show in June will take on added significance, most likely providing the industry with the first public opportunity to examine next-generation hardware," Sebastian stated.

"Our checks suggest that next-generation console hardware will be largely built from 'off the shelf' high-end PC components, along with hybrid physical/digital distribution models, enhanced voice controls and motion sensing (Kinect integration with every Xbox), and broad multi-media capabilities," he detailed.

He also had a word of warning for Nintendo, whom he believes will need to quickly bring its big franchises to Wii U if it wishes to widen the reach of the new console beyond the company’s loyalists.

"Following a somewhat lacklustre launch and holiday selling season, Nintendo will need to bring to market major first-party releases and retain the support of key third-party developers to reduce market share losses. In a negative scenario, Nintendo will be forced to prematurely lower the Wii-U price, and over the course of this cycle, we expect consideration will be given to extending first party franchises to other platforms."

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